Phony Email Targets Small Business Owners

April 17th, 2018 No comments

Phony Email Targets Small Business Owners

Warning by Better Business Bureau (BBB)

Small business owners are always looking for new business leads. The BBB warned business owners to be wary of scam emails that appear to be a Request for a Proposal (RFP) but are really targeting your business to separate you from your money or to tarnish your reputation.

The scam works as follows: The business owner receives an email with the subject “RFP Proposal” or something similar. It appears that a possible customer is asking you to bid on a contract. If you open the message, you will be able to download the attached RFP file. You may be asked for personal information to demonstrate that your company has the financial resources to handle the contract or it may include a link to a malware-infected file. You may have just Read more…

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Categories: Business Strategies Tags:

SOCIAL SECURITY AGE CONSIDERATION: DOES WORKING AFFECT BENEFITS?

April 10th, 2018 No comments

SOCIAL SECURITY AGE CONSIDERATIONS

DOES WORKING AFFECT BENEFITS?

 

Some individuals retire and begin to collect their hard-earned Social Security retirement benefits. What happens if they decide to work in their retirement years?

First, the individual is allowed to receive Social Security retirement benefits and work at the same time. However, if the person is younger than full retirement age and makes more than the yearly earnings limit, the Social Security Administration (SSA) will reduce the recipient’s monthly benefit. Here is how the reduction works. Read more…

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DOES IT MAKE SENSE TO PAY DOWN YOUR MORTGAGE?

April 3rd, 2018 No comments

DOES IT MAKE SENSE TO PAY DOWN YOUR MORTGAGE?

Effective with the 2018 tax year, the Tax Cut and Jobs Act (ACT) reduced the allowable deductions for individual taxpayers who itemized their deductions on Schedule A. While that is true, one also needs to focus on the increased standard deduction.

The ACT, effective for the 2018 tax year, increases the standard deduction to $12,000 for single taxpayers and $24,000 for married couples filing a joint tax return (MFJ).

For this exercise, let’s focus on MFJ returns. In 2017, the standard deduction was $12,700. If a married couple had itemized deductions that exceeded the standard deduction of $12,700, they would itemize their tax deductions on their 2017 Form 1040.

Looking at the increase in the standard deduction, MFJ returns that have less than $24,000 of itemized deductions in 2018 (taxes capped at $10,000, mortgage interest, & charitable deductions) would claim the standard deduction rather than itemize.

If your itemized tax deductions had included mortgage interest, Read more…

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2% MISCELLANEOUS TAX DEDUCTIONS – WILL YOUR TAXES INCREASE?

March 27th, 2018 No comments

Effective with the 2018 tax year, the Tax Cut and Jobs Act (ACT) reduced the allowable deductions for individual taxpayers who itemized their deductions on Schedule A. (Note: If you did not itemize but claimed the standard deduction, the ACT will definitely benefit you). One of the changes that will reduce allowable itemized deductions is the repeal of the 2% miscellaneous tax deduction. These deductions were referred to as the 2% miscellaneous tax deductions because the taxpayer was only allowed a deductions if such deductions exceeded 2% of the reported adjusted gross income (AGI) shown on the taxpayer’s Form 1040.

The typical miscellaneous 2% tax deductions were Read more…

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HAVE YOUR PARENTS’ U.S. TREASURY BONDS MATURED?

March 20th, 2018 No comments

HAVE YOUR PARENTS’ U.S. TREASURY BONDS MATURED?

Many persons complain about the very low interest that money market accounts pay. While that is of concern, how many persons hold U.S. treasury bonds that have matured? Do they realize that these bonds, once they have matured, pay zero interest?

In addition to checking your own portfolio, be sure to check with your parents and other elderly family members who may be on a fixed income to make sure that they are not holding bonds that are not throwing off any income.

The U.S. Treasury has a Savings Bond Calculator on its website that calculates the final maturity date, reflects current interest rate being earned, the next accrual date for payment of interest, and year-to-date interest earned.

To learn more about U.S. Treasury Bond Planning, we suggest Read more…

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Why Holding Real Estate in a C Corporation Is a (VERY) Bad Idea

March 13th, 2018 No comments

Classic Example of Double-Taxation with C Corps

 

Holding real estate in a C Corporation (or an LLC taxed as a C Corporation) is generally a very bad idea from a tax perspective.

Let’s assume the following facts:

  • C Corp purchases real estate for $100,000 or owner/shareholder contributes $100,000 of real estate to a C Corp
  • No capital improvements are made
  • Real estate appreciates to $1,250,000
  • The C Corp. has a taxable gain of $1,150,000 (sales proceeds of $1,250,000 less tax basis of $100,000)
  • The Corp has a tax liability of $241,500 (21% of taxable gain).
  • The Corp has slightly over a $1 million in its bank account that the shareholder wishes to invest in the stock market. The Corp distributes $1 million to the shareholder.
  • The shareholder has received a taxable dividend distribution from the C Corp. The owner reports the $1,000,000 of dividend income and let’s assume that s/he files as married filing jointly. This income, subject to tax at the capital gains rate (20%) as well as being subject to the net investment income tax of 3.8%, would result in an additional tax liability of $238,000.

Read more…

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New Partnership Audit Rules

March 6th, 2018 No comments

New Partnership Audit Rules

New Rules Became Effective January 1, 2018

If you are a partner in a partnership or in an LLC taxed as a partnership, you need to know that there are new IRS audit rules that became effective January 1, 2018.

The new rules require that any tax due on partnership adjustments made by the IRS must be paid by Read more…

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When is a Worthless Stock Worthless

February 27th, 2018 No comments

When is a Worthless Stock Worthless

Writing Off Worthless Stock Investments

Nobody likes to see his/her stock investment decline in value. It is even worse when the hopefully next Apple or Google stock declares bankruptcy. Is there some solace in that the stock investment can be written off as worthless for tax reporting purposes?

While taxpayers can write off as a deductible tax loss a wholly worthless security held by them, they cannot claim a loss when the stock becomes partially worthless. The challenge is to determine the year in which the stock becomes wholly worthless. The loss can be claimed Read more…

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PA Publishes Sch. UE Tips for Taxpayers

February 20th, 2018 No comments

PA Publishes Sch. UE Tips for Taxpayers

PA Conducts Systemic Reviews of PA Sch. UE Expenses & Deductions

The PA Dept. of Revenue (DOR) has taken an aggressive approach against taxpayers who claim unreimbursed employee expense. Prove it or lose it. First the expenses must not be reimbursable. Second, the expenses must be actual, reasonable, necessary, ordinary, and directly related to the employee’s job.

It is not uncommon for the DOR to contact taxpayers to request an explanation or supporting information for any amounts reported on Sch. UE. Since taxpayers who claim such deductions should already have Read more…

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Categories: Pennsylvania Tax News Tags:

Gig Economy Continues to Grow – Tax Trap for the Unwary

February 13th, 2018 No comments

Gig Economy Continues to Grow

Tax Trap for the Unwary

For purposes of this posting, let’s define the gig economy as workers who are primarily freelancers or independent contractors who have chosen to work for themselves for a variety of reasons, which could include the flexibility to work when and where the person desires, work only on projects of interest, or for work-life balances.

The National Bureau of Economic Research reported that 95% of employment growth in the U.S. between 1995 and 2015 was in the gig economy. A study by McKinsey Global Institute found that between 20% and 30% of workers are engaged in some type of independent contractor work. Intuit, the software company that offers QuickBooks software for business owners, estimates that the number of on-demand workers will more than double by the year 2020. The study also showed that 79% of existing on-demand providers are part-time workers and that this market will grow by 18.5% a year over the next five years.

Since the majority of self-employed individuals operate as a Sch. C business, they need to realize that there are some very significant differences between a self-employed business worker and an employee working for an employer. Self-employment means that the worker is responsible Read more…

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